Hey everyone — this post is coming from Saim, Your Crypto CPA from the Lone Star State here at Akif CPA 🤠
Here at Akif CPA, we’ve always believed in giving back — not just through pro bono tax returns, but by sharing the knowledge we’ve gained from helping thousands of clients navigate the complexities of crypto taxation.
So today, I’m giving you something that every crypto investor and trader can use:
👉 The 5 Step Framework for Doing Your Crypto Taxes the Right Way (this works whether they’re simple or super, super complicated).
Let’s dive in.
Step 1: Gather Complete and Accurate Records
Before you can start your crypto tax journey, you need a complete dataset.
That means pulling all trades from all years, across every wallet and exchange you’ve ever used — Coinbase, Kraken, Gemini, or any other platform.
Organize them clearly:
- Year 1, Year 2, Year 3, etc.
- Wallet 1, Wallet 2, Wallet 3…
Having everything in one centralized place will make your tax process 10x easier — and protect you from IRS headaches later. Make sure you have full and complete records.
Step 2: Clean, Classify, and Allocate Your Data
Once your data is collected, take a backup before you do anything else. Your raw data is gold — keep it safe. Don’t ever skip the backup!
Now, go through each transaction and:
- Clean any duplicate or missing entries
- Classify transactions properly (airdrops, swaps, staking rewards, liquidity pools, etc.)
- Allocate them to the right categories for tax purposes
If you’re using DeFi platforms or liquidity pools, be especially careful — these often trip people up because they involve complex taxable events.
Step 3: Use Wallet-Based Accounting (Starting 2025)
Here’s a crucial update:
Starting in 2025, Taxpayers must use wallet-based accounting for crypto starting in 2025. The actual notice that requires this is IRS Notice 2024-28 if you want to look it up.
Before this change, we used “universal accounting,” where we treated all wallets as one pool. But now, each wallet must be tracked individually for gains and losses.
This means you’ll need to account for basis, transfers, and disposals per wallet (Make sure you don’t skip over this—PER WALLET!!!) which adds another layer of complexity — but also more accuracy.
Step 4: Handle Tax Loss Harvesting and Avoid Duplication
Once your data is organized, make sure you include tax loss harvesting and carry forward losses from prior years.
And here’s a critical point: avoid duplication.
If your exchanges (like Coinbase or Kraken) issued you a 1099 form, those figures are already being reported to the IRS. Don’t import those same trades again from your CSV files — that would double count your income— DON’T double-count your income.
Also, make sure you check the accuracy of those 1099s! We saw many incorrect ones in 2024 and had to reissue to the IRS updated and accurate numbers.
Double-counting can lead to two bad outcomes:
- Overpaying your taxes, or
- Misstating your income — which is a big red flag for both the IRS and the DOJ (this is not a radar we want to get on as crypto traders).
Accuracy is everything in taxes, but there’s a hyper-fixation on crypto taxes from the IRS right now, so we want to be certain our numbers are accurate.
Step 5: Report and Optimize
Finally, it’s time to report everything correctly — and optimize your taxes.
At a minimum, you’ll need to complete:
- Schedule D and Form 8949 for capital gains and trades
- Schedule 1 for miscellaneous income (like airdrops)
- Schedule C if you’re mining or staking for profit
Even if you’re mining from home, if your intent was to make money, it’s considered active income — and it belongs on Schedule C. You may need additional forms if your wallets sent you inaccurate 1099’s.
Tax optimization here can make a huge difference. Proper classification can reduce your tax burden and help you stay compliant at the same time.
Final Thoughts
And there you have it — the five-step framework for tackling your crypto taxes like a pro.
At Akif CPA, we’ve helped thousands of crypto investors clean up their books, correct old filings, and optimize for the future. If you need help setting up your wallet-based accounting system or just want someone to review your work before you file, reach out to us at info@akifcpa.com.
We’ll make sure your crypto journey stays compliant, optimized, and stress-free.
🤠 This is Saim, your crypto CPA from the Lone Star State — see you next time!
Follow along in a full video on this topic:
